What is the primary function of liability insurance?

The primary function of liability insurance is to cover legal obligations for damages caused to others. This type of insurance provides protection for individuals and businesses against claims resulting from injuries and damages to third parties. It can cover legal defense costs and awarded damages if the insured is found to be legally liable.

Liability insurance is crucial because it addresses situations where the insured may be responsible for harming another person or their property. For example, if someone is injured in an accident for which you are at fault, liability insurance can cover the medical expenses of the injured party as well as any legal fees that may arise from a lawsuit.

Other options, while they relate to different types of insurance, do not define the primary purpose of liability insurance. Personal injury coverage is associated with covering injury to oneself, theft protection relates to property coverage, and paying for medical expenses typically falls under health or medical insurance rather than liability. Understanding the specific role of liability insurance is essential in grasping broader insurance concepts and recognizing its importance in risk management.